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Evolution of EPC Contracting
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HERVE BARON
© 2013 – Hervé Baron
The evolution of EPC contracting
Welcome to this presentation.
It shows the evolution that took place in EPC contrcting schemes over the last 30 years.
Comments are most welcome ([email protected]), which I will incorporate for the benefit of all.
Hervé
HERVE BARON
© 2013 – Hervé Baron
Contracting schemes EPC Contracts
Clients contracting strategy
Phase 1
HERVE BARON
© 2013 – Hervé Baron
Contracting schemes
Clients contracting strategy
Phase 1 • EPCM • Re-imbursable
HERVE BARON
© 2013 – Hervé Baron
Contracting schemes
Clients contracting strategy
Phase 1 • EPCM • Re-imbursable
Pro’s and Cont’s
HERVE BARON
© 2013 – Hervé Baron
Contracting schemes EPC Contracts
Clients contracting strategy
Phase 1 • EPCM • Re-imbursable
Pro’s and Cont’s
Phase 1 • All risks with Client • Budget and schedule slippage • Extensive supervision staff
HERVE BARON
© 2013 – Hervé Baron
Contracting schemes
Clients contracting strategy
Phase 1 • EPCM • Re-imbursable
Phase 2
Pro’s and Cont’s
Phase 1 • All risks with Client • Slippage budget and schedule • Extensive supervision staff
HERVE BARON
© 2013 – Hervé Baron
Contracting schemes
Clients contracting strategy
Phase 1 • EPCM • Re-imbursable
Phase 2 • EPCM • LS E&P
Pro’s and Cont’s
Phase 1 • All risks with Client • Slippage budget and schedule • Extensive supervision staff
HERVE BARON
© 2013 – Hervé Baron
Contracting schemes EPC Contracts
Clients contracting strategy
Phase 1 • EPCM • Re-imbursable
Phase 2 • EPCM • LS E&P
Pro’s and Cont’s
Phase 1 • All risks with Client • Slippage budget and schedule • Extensive supervision staff
HERVE BARON
© 2013 – Hervé Baron
Contracting schemes
Clients contracting strategy
Phase 1 • EPCM • Re-imbursable
Phase 2 • EPCM • LS E&P
Pro’s and Cont’s
Phase 1 • All risks with Client • Slippage budget and schedule • Extensive supervision staff
Phase 2 • Improvement over Phase 1 on
schedule and budget • Extensive supervision staff
HERVE BARON
© 2013 – Hervé Baron
Contracting schemes
Clients contracting strategy
Phase 1 • EPCM • Re-imbursable
Phase 2 • EPCM • LS E&P
Pro’s and Cont’s
Phase 1 • All risks with Client • Slippage budget and schedule • Extensive supervision staff
Phase 2 • Improvement over Phase 1 on
schedule and budget • Extensive supervision staff
What difference did Phase 2 bring compared to Phase 1 for Engineering development?
HERVE BARON
© 2013 – Hervé Baron
Contracting schemes
Clients contracting strategy
Phase 1 • EPCM • Re-imbursable
Phase 2 • EPCM • LS E&P
Pro’s and Cont’s
Phase 1 • All risks with Client • Slippage budget and schedule • Extensive supervision staff
Phase 2 • Improvement over Phase 1 on
schedule and budget • Extensive supervision staff
Engineering continuum
FEED then CFT for EPC
HERVE BARON
© 2013 – Hervé Baron
Contracting schemes
Clients contracting strategy
Phase 1 • EPCM • Re-imbursable
Phase 2 • EPCM • LS E&P
Phase 3
Pro’s and Cont’s
Phase 1 • All risks with Client • Slippage budget and schedule • Extensive supervision staff
Phase 2 • Improvement over Phase 1 on
schedule and budget • Extensive supervision staff
HERVE BARON
© 2013 – Hervé Baron
Contracting schemes
Clients contracting strategy
Phase 1 • EPCM • Re-imbursable
Phase 2 • EPCM • LS E&P
Phase 3 • LSTK
Pro’s and Cont’s
Phase 1 • All risks with Client • Slippage budget and schedule • Extensive supervision staff
Phase 2 • Improvement over Phase 1 on
schedule and budget • Extensive supervision staff
HERVE BARON
© 2013 – Hervé Baron
Contracting schemes
Clients contracting strategy
Phase 1 • EPCM • Re-imbursable
Phase 2 • EPCM • LS E&P
Phase 3 • LSTK
Pro’s and Cont’s
Phase 1 • All risks with Client • Slippage budget and schedule • Extensive supervision staff
Phase 2 • Improvement over Phase 1 on
schedule and budget • Extensive supervision staff
HERVE BARON
© 2013 – Hervé Baron
Contracting schemes
Clients contracting strategy
Phase 1 • EPCM • Re-imbursable
Phase 2 • EPCM • LS E&P
Phase 3 • LSTK
Pro’s and Cont’s
Phase 1 • All risks with Client • Slippage budget and schedule • Extensive supervision staff
Phase 2 • Improvement over Phase 1 on
schedule and budget • Extensive supervision staff
Phase 3 • All risks with Contractor
HERVE BARON
© 2013 – Hervé Baron
Contracting schemes
Clients contracting strategy
Phase 1 • EPCM • Re-imbursable
Phase 2 • EPCM • LS E&P
Phase 3 • LSTK
Pro’s and Cont’s
Phase 1 • All risks with Client • Slippage budget and schedule • Extensive supervision staff
Phase 2 • Improvement over Phase 1 on
schedule and budget • Extensive supervision staff
Phase 3 • All risks with Contractor
Less and less need for a PMC
HERVE BARON
© 2013 – Hervé Baron
Contracting schemes EPC Contracts
Contractor’s strategy
Phase 3 • LSTK
How does the Contractor mitigate risks?
HERVE BARON
© 2013 – Hervé Baron
Contracting schemes EPC Contracts
Contractor’s strategy
Phase 3 • LSTK • Construction sub-contract
HERVE BARON
© 2013 – Hervé Baron
Contracting schemes EPC Contracts
Contractor’s strategy
Phase 3 • LSTK • Construction sub-contract
Pro’s and Cont’s
HERVE BARON
© 2013 – Hervé Baron
Contracting schemes EPC Contracts
Contractor’s strategy
Phase 3 • LSTK • Construction sub-contract
Pro’s and Cont’s
Phase 3 • Partial risk sharing
HERVE BARON
© 2013 – Hervé Baron
Contracting schemes EPC Contracts
Contractor’s strategy
Phase 3 • LSTK • Construction sub-contract
Pro’s and Cont’s
Phase 3 • Partial risk sharing
2 different schemes: 3a and 3b
HERVE BARON
© 2013 – Hervé Baron
Contracting schemes EPC Contracts
Contractor’s strategy
Phase 3 • LSTK • Construction sub-contract
• Phase 3a
− General Construction Contractor
Pro’s and Cont’s
Phase 3 • Partial risk sharing
HERVE BARON
© 2013 – Hervé Baron
Contracting schemes EPC Contracts
Contractor’s strategy
Phase 3 • LSTK • Construction sub-contract
• Phase 3a
− General Construction Contractor
Pro’s and Cont’s
Phase 3 • Partial risk sharing
HERVE BARON
© 2013 – Hervé Baron
Contracting schemes EPC Contracts
Contractor’s strategy
Phase 3 • LSTK • Construction sub-contract
• Phase 3a
− General Construction Contractor
Pro’s and Cont’s
Phase 3 • Partial risk sharing
• Phase 3a
− Reduced risk and supervision
HERVE BARON
© 2013 – Hervé Baron
Contracting schemes EPC Contracts
Contractor’s strategy
Phase 3 • LSTK • Construction sub-contract
• Phase 3a
− General Construction Contractor
• Phase 3b – intense cost pressure
Pro’s and Cont’s
Phase 3 • Partial risk sharing
• Phase 3a − Reduced risk and supervision
HERVE BARON
© 2013 – Hervé Baron
Contracting schemes EPC Contracts
Contractor’s strategy
Phase 3 • LSTK • Construction sub-contract
• Phase 3a
− General Construction Contractor
• Phase 3b – intense cost pressure − Multiple Construction Sub-
Contractors
Pro’s and Cont’s
Phase 3 • Partial risk sharing
• Phase 3a − Reduced risk and supervision
HERVE BARON
© 2013 – Hervé Baron
Contracting schemes EPC Contracts
Contractor’s strategy
Phase 3 • LSTK • Construction sub-contract
• Phase 3a
− General Construction Contractor
• Phase 3b – intense cost pressure − Multiple Construction Sub-
Contractors
Pro’s and Cont’s
Phase 3 • Partial risk sharing
• Phase 3a − Reduced risk and supervision
HERVE BARON
© 2013 – Hervé Baron
Contracting schemes EPC Contracts
Contractor’s strategy
Phase 3 • LSTK • Construction sub-contract
• Phase 3a
− General Construction Contractor
• Phase 3b – intense cost pressure − Multiple Construction Sub-
Contractors
Pro’s and Cont’s
Phase 3 • Partial risk sharing
• Phase 3a − Reduced risk and supervision
• Phase 3b
− Increased competition − Extensive coordination
HERVE BARON
© 2013 – Hervé Baron
Contracting schemes EPC Contracts
Contractor’s strategy
Phase 3 • LSTK • Construction sub-contract
Pro’s and Cont’s
Phase 3 • Partial risk sharing
HERVE BARON
© 2013 – Hervé Baron
Contracting schemes EPC Contracts
Contractor’s strategy
Phase 3 • LSTK • Construction sub-contract
Pro’s and Cont’s
Phase 3 • Partial risk sharing
What usually happened?
HERVE BARON
© 2013 – Hervé Baron
Contracting schemes EPC Contracts
Contractor’s strategy
Phase 3 • LSTK • Construction sub-contract
Pro’s and Cont’s
Phase 3 • Partial risk sharing • E&P delays => Sub-contractor has
to accelerate hence claims
HERVE BARON
© 2013 – Hervé Baron
Contracting schemes EPC Contracts
Contractor’s strategy
Phase 3 • LSTK • Construction sub-contract
Pro’s and Cont’s
Phase 3 • Partial risk sharing • E&P delays => Sub-contractor has
to accelerate hence claims
What new scheme was introduced to mitigate?
HERVE BARON
© 2013 – Hervé Baron
Contracting schemes EPC Contracts
Contractor’s strategy
Phase 3 • LSTK • Construction sub-contract
Phase 4
Pro’s and Cont’s
Phase 3 • Partial risk sharing • E&P delays => Sub-contractor has
to accelerate hence claims
HERVE BARON
© 2013 – Hervé Baron
Contracting schemes EPC Contracts Contractor’s strategy
Phase 3 • LSTK • Construction sub-contract
Phase 4 • EP / C in Consortium or JV
Pro’s and Cont’s
Phase 3 • Partial risk sharing • E&P delays => Sub-contractor has
to accelerate hence claims
HERVE BARON
© 2013 – Hervé Baron
Contracting schemes EPC Contracts Contractor’s strategy
Phase 3 • LSTK • Construction sub-contract
Phase 4 • EP / C in Consortium or JV
Pro’s and Cont’s
Phase 3 • Partial risk sharing • E&P delays => Sub-contractor has
to accelerate hence claims
HERVE BARON
© 2013 – Hervé Baron
Contracting schemes EPC Contracts Contractor’s strategy
Phase 3 • LSTK • Construction sub-contract
Phase 4 • EP / C in Consortium or JV
Pro’s and Cont’s
Phase 3 • Partial risk sharing • E&P delays => Sub-contractor has
to accelerate hence claims
Phase 4 − Improved risk sharing − No claims − Less competitive
HERVE BARON
© 2013 – Hervé Baron
Contracting schemes EPC Contracts Contractor’s strategy
Phase 3 • LSTK • Construction sub-contract
Phase 4 • EP / C in Consortium or JV
Pro’s and Cont’s
Phase 3 • Partial risk sharing • E&P delays => Sub-contractor has
to accelerate hence claims
Phase 4 − Improved risk sharing − No claims − Less competitive
Which scheme is better for COMPANY: 3 or 4? Why?
HERVE BARON
© 2013 – Hervé Baron
Typical EPC associations
HERVE BARON
© 2013 – Hervé Baron
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